Web 3.0 has been heralded as the next evolution of the Internet – one that will make the web more immersive and democratic, thanks to a foundation of blockchain technology.
Recent layoffs at Meta and the collapse of cryptocurrency exchange FTX have raised questions about viability and credibility in an emerging space. But many Canadian businesses and investors are still betting big on the transformational potential of Web 3.0 across multiple sectors, including some of the most traditional, such as finance and manufacturing.
“I’m starting to see the beginning of killer apps and easy-to-use user interfaces, the integration of the old world with the new world,” says Avivah Litan, a distinguished VP analyst at Gartner Inc., a U.S.-based management consulting company with coverage that includes artificial intelligence (AI) and blockchain.
Gartner suggested in February that by 2026, 25 per cent of the population will spend at least one hour a day in the metaverse. An analysis by consultancy McKinsey found that tech companies, venture capitalists and private equity invested about US$120-billion in the metaverse in the first half of 2022.
As those “killer apps” that make the tech both easy to use and hard to live without move from idea to reality, businesses must decide how they will operate in a world where the Internet is decentralized and users have more control over their data.
What is Web 3.0?
Put simply, Web 1.0, Web 2.0, and Web 3.0 represent the past, present, and future of the Internet.
Web 1.0 refers to the era of cascading tile sheets (CSS), which introduced new control and customization options for web pages. Web 2.0 is the Internet we use every day: social media, cloud technology, web-based applications and interactive features among them.
Web 3.0 will be accessible and readable by both humans and machines, such as Internet of Things (IoT) devices or machine-learning algorithms. Several emerging tech sectors represent the future of Web 3.0, including augmented reality, the IoT and AI. (Web3 is a related-but-different concept referring to a blockchain-driven Internet involving cryptocurrency and tokenization, and the two terms are often used interchangeably.)
Some Web 3.0 applications are already in use, while others are still years away. For example, blockchain technology is comparatively mature and currently supports many business applications, Ms. Litan says, but a “killer app” has yet to emerge in the enterprise space. According to a Gartner analysis, blockchain wallets and smart contracts are about five years from maturity but developments such as the metaverse – a collective virtual 3D shared space that brings together physical and virtual reality – are more than 10 years from that point.
Despite that, some companies are exploring the enterprise potential of Web 3.0. Every Monday morning, XpertVR’s team gathers in virtual reality – first to go over staff priorities and news for the week, then to play a game like paintball or tower defence.
“It’s great because it’s a fun team-building and communication game, but also because it starts the week off light,” says Evan Sitler, the Niagara Falls-based company’s CEO and co-founder. “I believe more and more companies will begin adopting this technology as a meeting space because it is so much more intuitive and enjoyable, and it offers much more utility.”
Mr. Sitler points to potential applications of the technology such as exploring a remote job site or a prototype of a new product.
XpertVR’s staff are natural early adopters of the metaverse in the workplace – they design VR-based e-learning experiences. Though companies like Walmart and Accenture are exploring the possibilities of VR headsets – the latter piloting a virtual campus it calls the “Nth floor” – Web 3.0′s workplace integration is still young.
It’s not surprising that enterprise adoption of Web 3.0 technologies is moving more slowly than consumer adoption – this is the path technology usually takes, Ms. Litan says – but dozens of new or enhanced business applications are possible. These include everything from the use of immersive online worlds that bring together our offline and online activities and identities, to practical applications such as secure and decentralized medical records or financial transactions.
Potential and pitfalls of Web 3.0
This year’s scandals in the crypto world have cooled some of the excitement around Web 3.0 developments from their heights earlier in 2022. In July, crypto company Celcius Network filed for bankruptcy protection, bringing the already-sluggish prices of bitcoin and ethereum down even further. Then in November, leading crypto exchange FTX filed for bankruptcy after a liquidity crunch and a failed acquisition attempt by rival Binance.
These blows to the Web 3.0 sector aren’t fatal, Ms. Litan says. They might even strengthen the industry over time if they lead to better government regulation, for example, from the likes of the Federal Trade Commission in the United States, she says.
“This affects everybody’s trust in cryptocurrencies, but it didn’t really affect our client base’s view of Web 3 innovations,” Ms. Litan says of FTX’s collapse. “It really is like two different worlds, even though they use the same [blockchain] technology.”
The woes at FTX and Celcius stemmed not from blockchain technology itself, but from their off-chain activities mirroring pump-and-dump schemes seen in more traditional sectors, she explains.
With FTX, one Web 3.0 application – smart contracts, programs stored on the blockchain that run when predetermined conditions are met – actually mitigated some damage, serving as an example of a valuable use case for the technology, Ms. Litan adds. Decentralized finance companies reduced their related losses because once the bank run on the FTX’s crypto reserves began, their smart contracts triggered, closing their positions and limiting their losses.
Beyond cryptocurrencies, the potential for applications such as tokenized assets like NFTs is still there, she says – as is the industry interest in those applications.
“These technologies are unique,” Litan says of their appeal. “We can’t get these characteristics anywhere else.”
A fair and transparent network with decentralized power, unalterable records on the blockchain, and speedy data analysis have obvious business applications. Storing information on the blockchain reduces storage costs for businesses and increases security – one server going down won’t lead to the loss of vital data. And the decentralized blockchain tracks every transaction made on it on an unchangeable record, which provides reliable record-keeping with a high degree of security.
But along with the technological shifts needed to transition to Web 3.0, many companies will need to change how they see their role – and the role of their users or customers, who will gain new agency over their experience and transparency into business operations. Web 3.0 will remove some control from tech giants, making the Internet more decentralized and democratic. Smart contracts and the blockchain can reduce the need for third-party service providers, which can both reduce business costs and add extra layers of security.
For metaverse technology, the hardware is likely the biggest hurdle to widespread adoption, says James Watson, chief marketing officer of The Glimpse Group, a New York-based company providing VR-based platforms for health care and education clients.
“There are two challenges to solve here,” Mr. Watson says. “The first is packing enough processing power into a headset that’s lightweight and comfortably wearable. Portability is the problem cellphones faced, and VR and AR’s wearability challenge is not too different from that. The second is pricing, as companies need to be able to purchase multiple headsets at a cost-effective price point.”
Mr. Watson says he expects these two problems to become less of a hurdle as the technology matures. Right now, he points to employee training as a great entry point for companies interested in exploring this tech. “VR enhances training across sectors and is relatively easy to deploy at scale.”
The combined effects of a slowdown in the tech sector, an expected recession, and a sluggish stock market could slow Web 3.0 developments in the short term, Ms. Litan says. Meta laid off more than 11,000 workers in November and several other major tech companies – including Twitter, Microsoft, Alphabet, Shopify and Amazon – also let go of significant staff this fall.
Ms. Litan is watching several key areas for 2023. Identity systems are one area where Web 2.0 and Web 3.0 can be integrated, she says, providing users with more control over their identities online – for example, in setting up a secure and portable user profile on the blockchain for virtual workspaces. Patient information, document management, and environmental, social, and governance (ESG) documentation are other areas where decentralized records have clear use cases and can be combined with other Web 3.0 applications such as smart contracts.
For the metaverse, Mr. Watson is watching the growth in retail marketing, in particular with AR-powered shopping experiences through social platforms like Shopify or Instagram.
“Companies need to begin translating their products digitally in order to effectively showcase their product lines in this new immersive marketplace,” he says. Mr. Sitler is paying attention to advances in VR and AR software, making it more intuitive and immersive, along with potential advancements or new products in headset tech.
Financial services are another area to watch, despite continuing regulatory gaps and the potential chilling effect of FTX’s collapse. For example, the Depository Trust and Clearing Corporation (DTCC) is now processing more than 100,000 bilateral equity transactions a day through blockchain-based distributed ledger technology (DLT), with plans to increase transaction volume.
“It’s real-time settlement and factories, which takes a lot of risk out of the system in between,” Ms. Litan says.